Coinbase Accuses the SEC of Choking Crypto Industry

The United States Securities and Exchange Commission (SEC) has made headlines once again with its continued regulation-by-enforcement approach to the cryptocurrency industry. This time, the criticism comes from Coinbase, one of the largest crypto exchanges in the world.

In a filing with the U.S. Court of Appeals on May 31, Coinbase accused the SEC of aiming to “choke” the burgeoning digital asset industry.

Coinbase Takes a Stand Against the SEC

In its court filing, Coinbase stated, “The SEC is serious about the destruction of digital assets.” The exchange is pushing the court to compel the SEC to create clear and fair rules for the crypto industry, arguing that the agency is unwilling to engage in meaningful dialogue to establish such guidelines. 

“Giving the agency further opportunity to explain itself is both pointless and exquisitely undeserved,” Coinbase added.

The SEC Believes Current Rules are ‘Workable Enough’

Coinbase contends that the SEC believes its current rules are “workable enough” because it has taken enforcement actions against several firms for violations. 

The exchange emphasized that the SEC “has no duty” to make compliance with its rules feasible, suggesting that the agency’s enforcement actions are a testament to its belief that the existing regulations are sufficient.

Support from Within the SEC

Coinbase’s argument is not without internal support from within the SEC. Hester Peirce, a well-known pro-crypto SEC Commissioner, recently advocated for a cross-border sandbox program between U.S. and U.K. blockchain firms experimenting with tokenized securities.

Speaking at Consensus 2024, Peirce highlighted the challenges faced by those seeking relief from the SEC. “One of the problems that we’ve had is that people have tried to come into the SEC to get relief, but, you know, you sort of come in, and nothing happens. This would […] force the SEC’s hand a little bit,” she stated.

Coinbase vs. The SEC

In response to the criticism, the SEC has attempted to downplay the impact of its regulatory stance, claiming that its rules may only pose challenges for a small segment of the industry. Coinbase’s filing countered this assertion, stating, 

“The SEC tries to minimize its oppressive stance by asserting that only a ‘small set of market participants’ ‘may’ experience ‘compliance difficulties’ under ‘discrete provisions’ of existing rules.”

The SEC initiated a lawsuit against Coinbase in June 2023, alleging that the exchange had never registered as a broker, national securities exchange, or clearing agency, thereby evading the disclosure scheme required for securities markets.